The ECB cut its three key interest rates by 25 basis points as expected, lowering the deposit facility rate to 2.50%, the main refinancing rate to 2.65%, and the marginal lending rate to 2.90%.
The ECB cut its three key interest rates by 25 basis points as expected, lowering the deposit facility rate to 2.50%, the main refinancing rate to 2.65%, and the marginal lending rate to 2.90%. This decision reflects an updated assessment of inflation dynamics and the transmission of monetary policy.
The ECB acknowledged that monetary policy is becoming significantly less restrictive, easing borrowing costs for businesses and households. Inflation is now projected to average 2.3% in 2025, 1.9% in 2026, and 2.0% in 2027, with core inflation also approaching the 2% target. While domestic inflation remains elevated due to delayed wage and price adjustments, wage growth is showing signs of moderation.
Meanwhile, economic growth forecasts have been revised downward to 0.9% for 2025 and 1.2% for 2026, reflecting weaker exports and investment. The ECB remains data-driven and will adjust its policy as necessary to ensure inflation stabilizes around its 2% medium-term target without committing to a predefined rate path.
Source: European Central Bank
The euro advanced near $1.12 as the dollar softened, even as ECB rate cut bets remained firmly priced in. The yen strengthened for a fourth straight day despite a contraction in Japan’s Q1 GDP.
Detail Inflation Softens and Trade Momentum Builds (05.15.2025)The euro regained ground near 1.1200, supported by reserve status momentum and a weaker dollar, while the Japanese yen strengthened on growing pressure to eliminate U.S. car tariffs.
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